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Nonlinear Pricing In Asymmetric Duopoly

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  • MARCO ALDERIGHI

Abstract

We characterise, for both separate and interdependent markets, the local pure‐strategies Nash equilibrium of a spatial duopoly game, where consumers are horizontally and vertically heterogeneous, and firms have different cost structures and ranges of product lines. We show that standard results which emerged in the monopoly context can not be generalised to strategic contexts where firms retain market power and there is sufficient competitive pressure. We prove that in the asymmetric duopoly case, when markets are interdependent, the incentive compatibility constraints are slack, and there is no quality distortion.

Suggested Citation

  • Marco Alderighi, 2007. "Nonlinear Pricing In Asymmetric Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 46(3), pages 205-223, September.
    • Handle: RePEc:bla:ausecp:v:46:y:2007:i:3:p:205-223
    DOI: 10.1111/j.1467-8454.2007.00314.x
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    References listed on IDEAS

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    1. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    2. ANDERSON, Simon P. & de PALMA, André & THISSE, Jacques-François, 1992. "Interpretations of the logit discrete choice models and the theory of product differentiation," LIDAM Reprints CORE 1017, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Bernard Salanié, 2005. "The Economics of Contracts: A Primer, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262195259, December.
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    1. Marco Alderighi & Alessandro Cento & Peter Nijkamp & Piet Rietveld, 2011. "Second-degree Price Discrimination and Inter-group Effects in Airline Routes between European Cities," Tinbergen Institute Discussion Papers 11-118/3, Tinbergen Institute.

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